On deals and dealmakers.
RETAIL, PHARMA, REAL ESTATE, IMMIGRATION
Good morning. Yesterday I spent a few hours at TechCrunch Disrupt. A few notes:
Glossier and Outdoor Voices: If you have not heard of these brands, you will soon. Glossier, founded by former Vogue fashion assistant Emily Weiss, calls itself the “first beauty lifestyle brand.” Outdoor Voices makes athletic gear for (mostly) women; its CEO Tyler Haney says the company’s goal is to be “the next Nike.” Both companies are venture-backed, both have rabid fan bases of women, both are frequently sold out. More relevant to Term Sheet readers, both companies have turned out buyout offers from larger competitors.
The most notable thing about Glossier and Outdoor Voices is the way they view physical retail spaces, which they have just started to experiment with.
Outdoor Voices’ stores “are not about revenue but about community — giving the customer a hook into the O.V. community” Haney says. Same goes for Glossier’s “beauty showrooms,” according to Weiss. “While the sales are through the roof and defy all odds, what’s more interesting are the girls who come once a week because they want to feel the energy in the room, and I can’t say that about large beauty retailers,” she says.
With retailers set to close stores at a record clip this year, they’ll have plenty of open real estate in which to expand their physical footprint.
Speaking of physical spaces: WeWork CEO Adam Neumann confirmed that the company is on track to hit a $1 billion “revenue run rate” this year. That includes revenue from renting out office spaces, its nascent WeLive co-living business, partnerships with building management companies, and “digital memberships.” He noted that the company has 40% margins in its U.S. business and tends to “hover around Ebitda-break-even,” though it is investing heavily in growth right now. On July 1, WeWork will open its first building in India.
Term Sheet readers may recall Neumann’s answer to the question of whether WeWork is a real estate company, a tech company, or a services company from one year ago at Fortune’s Brainstorm Tech conference. It is neither, he said at the time. WeWork is a “community company.”
Neumann is still resisting labels for WeWork, but on Monday he said he is reconsidering the community shtick. “We used to say we are a community company, but we are starting to figure out now that we ourselves are discovering what is the best kind of company that we should be,” he said. He believes WeWork blends the best of mission-driven non-profit companies with for-profit companies. “We want to be a company that sets an example that lives by our own words,” he said.
Neumann didn’t comment on reports that his company is planning a monster $3 billion round of funding from SoftBank’s Vision Fund, but he did address concerns about the $1 billion in secondary funding that the deal will reportedly include. (Moderator Connie Loizos cited a now-deleted tweet from a venture investor, who sniped, “Kiss goodbye whatever discipline and grit was left in WeWork. $1 billion secondary is corruption defined.”) Neumann said WeWork is seven years old, and wants to reward its early employees. “It’s important to think, ‘Is there something we can do for employees?’ … I think there is a way to do it correctly,” he said.
Optimism: Fortune’s Polina Marinova (who, as a reminder, is now helping me with the deal items below) interviewed Steve Case yesterday about health care, automation, and his favorite topic, tech hubs around the U.S. Notably, Case said he is hopeful President Trump will consider immigration reform for startups:
I’m hopeful that the administration will support a startup visa because I think they will recognize that we need to win the global battle for talent. We’ve just got to figure out a way to continue being a magnet for talent. Politically, Trump has probably concluded that he needs to deliver on some campaign promises he’s made first, but I am hopeful that in the next year or so, a startup visa or something similar will be put in place. People will say he’s been so aggressive on immigration that it’s unlikely he’ll support something like that, but I’m more optimistic. Read the rest here.
Gossip: The venture capital dinner party game du jour is guessing which major firms aren’t in any of the estimated 15-17 planned VC-backed IPOs this year…
Pharma M&A: Sure, there’s lots of pharma consolidation happening, but pharma supply chain consolidation is just as prevalent. Fortune’s Sy Mukherjee reports on the reason why:
The lines between big pharmas and small biotechs are blurring, with pharmaceutical titans pursuing mergers with rivals and various partnerships with more bare-bones, nimble upstarts. Many of the largest companies are also grappling with an ongoing plunge in return-on-investment when it comes to drug R&D and are desperate to seed their experimental drug pipelines while simultaneously cutting costs.
This amounts to massive upheaval for the third-party clinical research, development, and manufacturing firms which have relied on the primary drug market. A contract research or manufacturing organization may have a relationship with one company only to see it crumble after a merger. Their defense mechanism? The same as traditional pharma’s: consolidation. Read more here.
Yesterday’s column, continued: Gurbaksh Chahal posted a screenshot of a cease & desist email from his lawyer to Nin Desai on Twitter. It’s not dated, and he declined to share the date it was sent. Based on its contents, it was sent after Nin Desai went on TV to discuss the appointment, which happened more than a month after the original announcement.
THE LATEST FROM FORTUNE...
• The Internet of Beers.
• All the hedge funds that own Snap.
• The travails of Uber and Etsy.
• Hillary launches a PAC.
• IBM and Nutanix team up on data center hardware for AI.
• The slippery slope at the heart of Trumpcare.
• Amazon’s bet on furniture.
Comcast Ventures almost invested in the app owned by the Fyre Festival organizers. Goldman Sachs, fintech and Brazil. A critical look at alternative asset fees paid by pension funds, and the private equity industry’s response. Online mattress company goes public.
• Symphony Communication Services, a Palo Alto, Calif.-based cloud communication platform, raised $63 million in funding. BNP Paribas led the round. Symphony is now valued at more than $1 billion, according to TechCrunch.
• LevelUp, a Boston-based mobile payment network developer, raised $50 million in funding. Investors include JPMorgan Chase, US Boston and CentroCredit Bank.
• OpenGov, a Redwood City, Calif.-based government performance management platform, raised $30 million in Series C funding. Emerson Collective led the round.
• Scientist.com, a San Diego, Calif.-based e-commerce marketplace for scientific research, raised $24 million in equity financing. Leerink Transformation Partners and 5AM Ventures co-led the round, and were joined by Heritage Provider Network, Bootstrap Ventures and Jack Giarraputo.
• Nymi, a Canada-based developer of a wearable authenticator, raised $15 million in Series B funding. GII Tech led the round. Existing investors Relay Ventures and Ignition Partners participated.
• WinView, a Redwood City, Calif.-based sports betting startup, raised a $12 million in Series B funding. Investors include Graham Holdings Co, Discovery Communications, Monumental Sports & Entertainment, and LionTree Partners.
• Karamba Security, an Ann Arbor, Mich.-based autonomous vehicles cybersecurity provider, raised $12 million in Series B funding. Existing investors YL Ventures and Fontinalis Partners co-led the round, and were joined by GlenRock Israel, Paladin Capital Group, Liberty Mutual Strategic Ventures, Presidio Ventures, and Asgent.
• Numerated Growth Technologies, a Boston-based financial technology company, raised $9 million in funding. Venrock and Cultivation Capital FinTech Fund co-led the round.
• Talent.io, a Paris-based tech hire recruitment platform, raised $8.8 million (€8 million) from existing investors Alven Capital and Ventech.
• Oddup, a Hong Kong-based startup research platform, raised $6 million in Series A funding. The Times Group led the round, and was joined by Moneta Ventures and White Capital. Existing investors including 500Startups and Click Ventures participated.
• GrandCanals, a Los Gatos, Calif.-based fulfillment analytics platform, raised $4.8 million in Series A funding. Cloud Apps Capital Partners and AllMobile Fund co-led the round.
• Airy3d, a Canada-based 3D computer vision company, raised $3.5 million in seed funding. CRCM Ventures and R7 Partners co-led the round, and was joined by WI Harper Group, Robert Bosch Venture Capital and Nautilus Venture Partners.
• OpenInvest, a San Francisco-based social impact investing platform, raised $3.25 million in seed funding. Andreessen Horowitz led the round, and was joined by Abstract Ventures, Wireframe Ventures and SV2.
HEALTH AND LIFE SCIENCES DEALS
• BiomX, an Israel-based developer of microbiome-based therapeutics, raised $24 million in Series A funding. OrbiMed, Johnson & Johnson Innovation, and Takeda Ventures led the round, and were joined by Seventure Partners, MiraeAsset, and SBI Japan-Israel Innovation Fund.
PRIVATE EQUITY DEALS
• Battery Ventures acquired Concurrent Real-Time, a Pompano Beach, Fla.-based systems software developer, for $35 million in gross proceeds.
• Pfingsten Partners acquired Sign-Zone, a Brooklyn Center, Minn.-based signage and displays manufacturer. Financial terms weren’t disclosed.
• GTCR made an investment of an undisclosed amount in Vivid Seats, a Chicago-based secondary ticket marketplace, from Vista Equity Partners.
• Beringer Capital acquired a majority interest in iCiDIGITAL, a Raleigh, N.C.-based digital marketing company. Financial terms were not disclosed.
• The Stephens Group acquired Pearlman Enterprises, a Norcross, Ga.-based distributor of hard surface supplies and equipment. Financial terms weren’t disclosed.
• Hanse Orga Group, which is backed by Waterland, has agreed to acquire Dolphin Enterprise Solutions Corporation, a Morgan Hill, Calif.-based provider of process automation and data management solutions for SAP systems. Financial terms weren’t disclosed.
• L Squared Capital Partners recapitalized Oracle Elevator, a Dover Plains, N.Y.-based elevator service operator. Financial terms weren’t disclosed.
• Advent International Corp. and Shanghai Pharmaceuticals Holding Co. are weighing an offer at about €70 ($77) a share for Stada Arzneimittel AG, a Germany-based pharmaceutical ingredients maker, according to Bloomberg. Read more.
• WideOpenWest, an Englewood, Colo.-based cable operator set a range for its IPO Monday. The sixth largest cable operator in the U.S. said it plans offer 19 million shares at a range of $20 to $22. At midpoint, the company would raise about $400 million. Avista(56%) and Crestview Funds(37%) back the company, while UBS and Credit Suisse are lead underwriters.
• Ant Financial, the payment company spun off of Alibaba, has once again delayed its IPO until late 2018 at earliest, the Financial Times reported. Ant, valued at about $60 billion, was previously rumored to be seeking an IPO in Hong Kong, though the Times reports that Ant is also seeking to list overseas. That however would require regulatory approval from Beijing—part of the reason for the delays.
• argenx, a Netherlands-based biotech developing autoimmune disease treatments, said it would offer 5 million ADSs at about $16.62 a share (based on its Monday share price on the Euronex Brussels) to raise about $83 million. Previously, the firm said it would to offer some 3.6 million ADSs at about $18.18 a piece. argenx will list on the Nasdaq as “ARGX.” Cowen and Piper Jaffray are lead underwriters in the deal.
• Spectrum Brands Holdings has agreed to buy PetMatrix, a Saddle Brook, N.J.-based pet chews manufacturer. Financial terms weren’t disclosed. The seller is Mark Stern, an affiliate of Friend Skoler & Co. The deal is valued at about $255 million.
FIRMS + FUNDS
• Section 32, a venture capital firm founded by former Google Ventures head Bill Maris, has raised $150 million for its debut fund.
• Tom Ebling joined General Catalyst as an executive-in-residence. Previously, Ebling was the CEO and chairman of Demandware.
• Nino Fanlo will join Human Longevity as the finance chief. Previously, Fanlo was SoFi’s president and chief financial officer.
• Martin Clark, James Darlington and Jeremy Thompson joined Maven Capital Partners as investment managers.